01 Jul Learning From "215 Years of Global Multi-Asset Momentum: 1800-2014"
Significance of Relative Momentum premium is confirmed inside and across asset classes for the last two centuries.
In this article, Absolute Momentum will be used interchangeably with trend following or time series momentum. Relative Momentum will be used interchangeably with cross-sectional momentum or relative strength.
The paper investigated and confirmed the significance of the momentum premium inside and across asset classes.
They documented that on average, since 1800, momentum effect appears significant in all asset classes, except in commodity spot prices where it is significantly opposite.
Between 1800 and 2014, country equity momentum has the largest long/short spread of 0.88% per month (t-stat 10.6), followed by currencies with a spread of 0.51 % per month (t-stat 9.6). Inverse commodity momentum generates 0.45% per month (t-stat 5.5), U.S. stock momentum generates 0.51% per month (t-stat 6.0), global sector momentum generates 0.36% per month (t-stat 6.6), and global country bond momentum averages 0.13% per month (t-stat 2.3). Cross-asset class momentum strategy, consisting of four asset classes, generates 0.45% per month (t-stat 10.2). The equally-weighted combination of the six intra-asset class level plus one cross-asset class momentum strategies averages a long/short spread of 0.45% per month (t-stat 15.4).
Research Paper: 215 Years of Global Multi-Asset Momentum: 1800-2014
Authors: Christopher C. Geczy, Mikhail Samonov
Organisations: The Wharton School of the University of Pennsylvania, Forefront Analytics